Intangible assets

More About Intangible assets

Intangible assets are non-monetary assets that aren't physical or not tangible, meaning they can't be seen or touched. Intangible assets may include goodwill, going concerns, information bases, customer lists, covenants not to compete, patents, copyrights, formulas, trademarks, franchises, brand recognition, or contracts for intangibles. Intangibles can be classified as either indefinite or definite. Two categories are limited-life intangible assets and unlimited-life intangible assets. For federal tax purposes, some intangible assets costs must be capitalized, not treated as deductible expenses. Tax Analysts offers news, analysis, reports, and primary source materials on important tax concepts for intangibles.

Amortization, depreciation, and capitalization are important concepts for intangibles and federal tax, as well as accounting methods to depreciate property. Amortization is a method of recovering, or deducting capital costs over a fixed time period. Tax Analysts provides research tools and analysis for section 197 intangibles, the IRC, and regulations on how to amortize capital costs. Amortization rules of 197(f), taxpayer increases the basis of remaining section 197 intangibles by the basis remaining in abandoned asset. Increased basis is recovered through amortization of the remaining section 197 intangibles.

Writing off intangible assets, for instance a section 197 intangible like goodwill, may be possible. Tax Analysts offers insight on the loss regulations under Treasury Reg. 1.165-1. To be allowed as a deduction, a loss must be evidenced by closed and complete transactions, fixed by identifiable events, and sustained in the current tax year. For intangibles, two requirements apply: the taxpayer must cease the business to which the goodwill relates; and 197(f)(1) cannot apply. Tax Analysts has a comprehensive library of IRS and Treasury materials, documents, and guidance, including Revenue Rulings, for instance Rev. Rul. 57-503, which concludes that when a taxpayer abandons a business and all associated assets, including purchased goodwill, the basis in goodwill is deductible as an ordinary loss.